Cable not dishing it

The year 2000 saw cable TV lose a few ingredients to its subscriber mix. Direct broadcast satellite has spooned into cable TV's market share and served itself two percent of the industry's subscribers.

The FCC released a report showing that, while cable is still the dominant pay medium, as of June 2000, cable had 80 percent of the pay television industry, down from 82 percent for the same period a year before.

But Gerry Kaufhold, a principal analyst at Cahners In-Stat Group, tells CED the report may not be as foreboding as it seems.

"A trend among those who get cable is to actively look for alternatives. The big thing about DBS is that in the past they had not been able to carry local stations into local markets. Subscribers may have gotten cable for the local stations and subscribed to DBS as well. The damage to cable may not be as big as the FCC reports if lots of people in rural areas have both a DBS and cable connection," says Kaufhold.

"There are also economic considerations that prevent 20 to 25 percent of the population from purchasing either cable or satellite. In Europe right now, they are rolling out multi-cast terrestrial services, and over time, some people who purchase cable service may find lower cost alternatives by subscribing to multi-digital terrestrial multi-cast. Multi-cast offers fewer choices, but also costs less money. So those services may also eventually erode some cable viewership.

"If you look at cable's service bouquet, it offers high-speed Internet service and two-way voice telephony in addition to its entertainment services. And in the next few years I think we'll see a real push toward VOD. So the average monthly revenue from subscribers is going up. So the good news for cable is that if they lose a few viewers, the revenue will still grow because they will get more revenue from each viewer they have," says Kaufhold.

"Finally, if the economy begins to go south into a recession, the number of people getting basic cable may rise. Basic cable costs less, so the trend [toward DBS] may reverse because cable can offer a lower [price] starting point than DBS can."